Key points of investment:

Sales in domestic and overseas markets grew together, and overseas growth was particularly prominent. The company's revenue growth was high in the third quarter of 2024 and the first three quarters of 2024. In the third quarter of 2024, the company achieved revenue of 3.738 billion yuan, a year-on-year increase of 27.17%, an increase of 25.55 percentage points year-on-year, and an increase of 15.86 percentage points; in the first three quarters of 2024, the company achieved revenue of 10.912 billion yuan, an increase of 13.05% year-on-year, and an increase of 5.59 percentage points year-on-year. According to the company's announcement, in the first three quarters, domestic business maintained steady growth, up 6.94% year on year; international business maintained a high growth rate, up 21.77% year on year. In the first three quarters, the company's overseas business growth rate was 14.83 percentage points higher than that of the domestic market, and overseas contributions were outstanding. Overseas channels have been effectively broadened and declined, and market promotion strategies such as expanding customers and increasing the added value of individual customers are the main reasons for the continued rise in overseas sales.

Domestic molasses prices have been steadily declining, hydrolyzed sugar production capacity has been implemented, the company's domestic cost pressure has been relieved, and cost reduction will also enhance the company's performance. According to Pansugar Technology: As of November 22, 2024, the average transaction price of molasses in Guangxi was 1,336 yuan/ton, down 70 yuan/ton from the previous month, or 5.02%. The price range was between 1,330 and 1,340 yuan/ton, down 27.78% from the same period last year. According to Pan-Sugar Technology, the current price of hydrolyzed sugar is 1,400 yuan/ton, which is slightly higher than the price of molasses. The decline in molasses prices will put downward pressure on the price of hydrolyzed sugar. Judging from the downward trend in costs, we believe that the company's domestic profit margin will stabilize in 2025.

In the first three quarters, the company's profit declined, which was related to the decline in gross margin and the increase in the expense ratio.

In the first three quarters of 2024, the company recorded a gross profit margin of 23.28%, a year-on-year decrease of 1.39 percentage points; a net profit margin of 8.89%, a year-on-year decrease of 0.95 percentage points. According to the company's interim report, the company's share of overseas revenue is close to 40%, so international energy prices and transportation prices have an impact on the company's overseas market profits. In the first three quarters of 2024, the international energy price index and the BDI price index both rose sharply. We believe that the decline in the company's gross margin was due to the rise in international related prices. Furthermore, the company's financial expense ratio for the first three quarters rose to 0.41% from 0.08% last year, which was the main reason for the decline in net interest rates.

Investment advice: We forecast the company's earnings per share for 2024, 2025, and 2026 to be 1.57, 1.80, and 2.05 yuan, respectively. Referring to the company's closing price of 35.86 yuan on November 21, the corresponding price-earnings ratios were 21.96 times, 19.12 times, and 16.80 times, respectively. We maintain the company's “gain” rating.

Risk warning: Continued increases in financial and sales rates will erode the company's profits. Demand for yeast in the domestic market has been slow to recover. International inflation continues, and the cost pressure on overseas business is high.